The government's rejection of the sale of Lochinver Station, near Taupo, to Chinese-owned Shanghai Pengxin has been welcomed by Federated Farmers.

President of Federated Farmers Dr William Rolleston insists while New Zealand on the whole is in need of foreign investment, there needs to be a 'clearly demonstrated benefit” to the economy both locally and nationally.

Lochinver Station, near Taupo. Photo: Fairfax NZ.

'This was not proven here,” says Dr Rolleston, 'and we believe the Lochinver decision reinforces the importance of changes made to the Overseas Investment Office rules over recent years.

'We now have a more thorough and robust framework for making critical decisions on foreign investment in rural land, and what we've seen here is ministers applying this framework as it was intended to be used.

'What we need is for foreign investors, and those involved in the sale of rural land, to work harder to find ways to demonstrate economic benefit, both on the property they are targeting and for the broader industry.”

However, not everyone has welcomed the veto, with New Zealand First Deputy Leader Ron Mark calling the rejection of the sale 'baffling”.

'The National government has merrily ticked off over a million hectares of land to foreigner buyers, and none of those sales add substantial benefit for New Zealand,” says Mark.

'Is this nervous third term government only acting now because their polling shows they are on the slippery slope? Their continued sell-off of New Zealand is resoundingly unpopular. Show us the substantial benefit from all the sales.

'If Lochinver adds no benefit, what value was there in letting the same company, Shanghai Pengxin, buy the 16 Crafar Farms, when there was New Zealand interest, and the 13 Synlait farms in Canterbury? Show us the substantial benefit from all the sales.

'New Zealand First says non-residents should not be buying our land. There will be no more of it.”

In December 2010, government tightened the rules around foreign ownership by way of an ‘economic interests' factor in the Overseas Investment Office's consideration.

This allows ministers to consider whether New Zealand's economic interests are adequately 'safeguarded and promoted” in the case of land aggregation or vertical integration.

This land aggregation threshold applies where an applicant is seeking to purchase a property or portfolio of properties which equates to more than 10 times the average size of a dairy or sheep and beef farm. At 13,837 ha, Lochinver is three times larger than this threshold.

A ‘substantial and identifiable benefit' test was also incorporated into the overseas investment decision framework in 2010, and was further bolstered in 2012 by a High Court decision adding a ‘with or without' test – a key determinant of the government's Lochiniver decision.

'The ‘with or without test' is designed to ensure that any investment has benefit over and above just making a farm work better, and that these benefits can only be driven by foreign investment,” says William.

'Since Lochinver is so highly regarded in farming circles, this was always going to be a tough test to pass, and because the station is three times the land aggregation trigger level for foreign investment, it had to be a test that was carried out thoroughly and confidently.”